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The early March visit of Vice President Joseph Biden to the Middle East was an inauspicious beginning to the resumption of new Israeli-Palestinian talks. Soon after he arrived in Israel came the announcement of a plan to build another sixteen hundred housing units in East Jerusalem, where Palestinians hope to have the capital of a Palestinian state. Since then, the United States has objected to both the timing and substance of the announcement, but Israeli Prime Minister Benjamin Netanyahu has indicated the building plan will move forward.

Why are the United States and Israel divided over the settlements issue? In this roundup of CFR experts, Senior Fellow Elliot Abrams says the Obama administration's new settlements demands suggest that it is trying to destabilize the governing coalition, while Senior Fellow Steven A. Cook sees the dispute as evidence that Israel and Washington are at odds about a two-state solution.

President Emeritus Leslie Gelb and Adjunct Senior Fellow Daniel Senor think the settlements announcement undermines U.S. power and its work to both move a peace process forward and rein in Iran's nuclear efforts. Adjunct Senior Fellow Steven Simon argues that Washington sees the settlements as an obstacle to talks because they are making Palestinians lose faith in a two-state solution.

The United States and Israel have long had different views of the settlements, but the issue has been managed without a crisis for decades. In the Bush administration, a deal was struck whereby the United States would not protest construction inside existing settlements so long as they did not expand outward. The current crisis, ostensibly about construction in Jerusalem, was manufactured by the Obama administration--and as it is about Jerusalem, isn't even about activity in the settlements.

The current crisis stems from the announcement of plans--not actual construction--in a part of the city five blocks from the 1967 lines and in a neighborhood that very clearly will remain part of Israel after any negotiated settlement.

Every Israeli government since 1967, of left or right, has asserted that Jerusalem is Israel's capital and has allowed Israeli Jews to build there. The current crisis stems from the announcement of plans--not actual construction--in a part of the city five blocks from the 1967 lines and in a neighborhood that very clearly will remain part of Israel after any negotiated settlement. To escalate that announcement into a crisis in bilateral relations and "condemn" it--using a verb we apply to acts of murder and terror, not acts of housing construction--was a decision by the U.S. government, not a natural or inevitable occurrence.

Among the errors by the administration is the assertion that unless all construction freezes, there can be no negotiations. There were face-to-face peace negotiations between Israelis and Palestinians year after year while construction took place in settlements and in Jerusalem, so this is a new demand and a new obstacle to peace. Negotiations are not a favor the Palestinians bestow on us or on Israel; they are the path to the statehood the Palestinian Authority claims is its right and its goal. It appears the United States and Israel are divided over all this now because the Obama administration is imposing new demands on Israel, and building tensions in the bilateral relationship, in an effort to destabilize the governing coalition in Israel. It is a shameful way to treat an ally.

The division between the United States and Israel over settlements in the West Bank is not all that new. Different presidents have sought to handle the issue in varying ways, from the direct criticism--George H.W. Bush and now Barack Obama--to the diplomatic circumlocutions of the Clinton and George W. Bush years that identified settlements as "problems" and "complicating factors."

Regardless of the way they have chosen to approach the issue, Washington's support for a two-state solution to the Palestinian-Israeli conflict puts it in direct conflict with Jerusalem.

Regardless of the way they have chosen to approach the issue, Washington's support for a two-state solution to the Palestinian-Israeli conflict puts it in direct conflict with Jerusalem. Various Israeli governments over the years have alternatively identified settlements as contributions to national security and/or a reflection of the inherent right of Israelis (and Jews from all of the world) to live in their biblical homeland. It's hard not to see how these two positions are mutually irreconcilable.

With anywhere from three hundred thousand to five hundred thousand Israelis living in all disputed territory combined (depending on whether one counts East Jerusalem) and all the attendant infrastructure that comes with 121 settlements, it has become increasingly hard to imagine a division of territory that would satisfy both Palestinian and Israeli political needs.

Observers often invoke Jerusalem or refugees as the toughest issues in the conflict, and although they are not easy, one can imagine a resolution to these difficult problems. Not so with the settlements. As construction continues in both Jerusalem and the West Bank, a two-state solution looks less possible, undermining American diplomacy and prospects for regional stability.

Israelis think that announcing construction of new housing units in East Jerusalem during Vice President Biden's visit last week--and upping the ante by announcing additional construction Tuesday--will compel President Obama to back down from scheduled "proximity" talks. They are very wrong. Israel's move was stupid, dangerous, and self-defeating. Worst of all, it seriously damaged American power in the Middle East.

The working assumption is that if any nation can bring about peace between Israel and the Palestinians, it is the United States. Israel's move seriously undermined that perception. The disposition of Arab leaders to go along with future talks has been seriously eroded.

Israel has to understand a basic reality: It is American power that gives the Jewish state a realistic hope of survival without constant war.

This slap in America's face also made it look like Washington can be pushed around. Vicious rumors are already afoot that Israel sees Obama as weak. But Israelis who are rejoicing in their insult would do well to imagine Tehran's reaction and to realize that they have weakened America's position in dealing with Iran's evolving nuclear capability.

Some Israeli leaders may, crazily, believe that their political position in the United States is so solid that they need not worry about losing American support. But they should not be so sanguine. Americans, like others, are living in perilous times. Economic woes at home will lead to less patience with rebukes from abroad.

So why on earth did the Israelis do this? They had to know that Obama would react sharply to Israel's rebuke and that the blowup would imperil resumption of "proximity" talks with the Palestinians. But failure of those talks is precisely what Israeli right-wingers seek. To them, these talks lead only to Israeli concessions on the West Bank and ultimately East Jerusalem itself.

Both sides have to move quickly to head off further escalation. At a minimum, Netanyahu has to suspend implementation of the offending announcement indefinitely. On a deeper level, Israel has to understand a basic reality: It is American power that gives the Jewish state a realistic hope of survival without constant war.

The unauthorized announcement by an Israeli minister to build new housing units in the Jerusalem area was a diplomatic bumble. But the Obama administration's decision to "condemn" this mistake was a much larger blunder. The problem is not this particular flap, which will pass, but the underlying misunderstanding that our government's outburst reflects.

Vice President Biden himself said in Israel that the peace process is best served when there is no "daylight" between the United States and Israel. He was right, but he broke his own rule. The word "condemn"--which has only been used by the United States against Iran, North Korea, and egregious human rights violations--created precisely such daylight. The result was predictable: The Arab League immediately announced that it was reconsidering its support for Israeli-Palestinian proximity talks.

The whole flap is a distraction from the most urgent task, which is to stop Iran from going nuclear.

It should be no surprise that when the United States distances itself from Israel it does not win influence with the Arab world. What happens is the opposite: The Arab world follows suit and backs away from the peace process and Israel.

The damage, however, does not end with the peace process. The whole flap is a distraction from the most urgent task, which is to stop Iran from going nuclear. The greatest danger--and opportunity--for peace hangs upon the confrontation between Iran and the West. America's laser focus should be on standing with the Iranian people against their regime.

If President Barack Obama wants to advance Mideast peace--not to mention human rights and an array of other American interests--he should not be picking another counterproductive fight with Israel, and--in so doing--distracting from the real and urgent Iranian threat.

The United States and Israel are divided over settlements because the White House believes that the two-state solution is losing credibility among Palestinians, who see no sign that Israel intends to leave the bulk of the West Bank. From this perspective, a settlement freeze would not only be a compelling confidence-building measure, but would boost Palestinian President Mahmoud Abbas' position in his struggle with Hamas. What Prime Minister Netanyahu thinks about the U.S. view is unknown; what is clear is that settlements are as much a domestic political football as they are a diplomatic issue, and that there are important members of Israel's ruling coalition who favor their expansion.

This was the backdrop for a U.S.-Israeli clash that had been brewing since last year, when the White House failed to win Netanyahu's agreement to a "full freeze" on all settlement activity on the West Bank. The diplomatic ground had not been well prepared by Washington, and the Israelis were genuinely perplexed by President Obama's sweeping demand. Their sense of unbelief, however, seemed inexcusable given the signals that Obama had given during his campaign.

Settlements are just the first of what are likely to be bruising battles over refugees, the status of Jerusalem's holy sites, and the disposition of borders.

For its part, the administration seems not to have asked two pivotal questions: What do we mean by "full freeze"? And, what if Netanyahu says no? The first issue had to do with diplomatic complexities that have coalesced around settlement activity over a period of years. The second entailed an understanding of Israeli coalition politics, which would have suggested that Netanyahu's vulnerabilities lay to his right, not left; a fact that would virtually guarantee a "no" to Washington's demand and lead to a protracted and damaging negotiation of the meaning of "full freeze." And it's not clear whether anyone thought about what this would mean for Abbas, who told Asharq al-Awsat that he'd been treed by Obama and couldn't climb down.

Still, the issue of settlements was ripe for the picking. Most Israelis no longer consider the West Bank to be part of their country, apart from the suburbs that cluster along the Green Line. In a national poll last year, 73 percent of the respondents said that they had not visited the occupied territories as tourists. If you are an Israeli, you go to Rome for vacation, not Ramallah. In effect, the Green Line has already solidified as a kind of border in the Israeli imagination. A University of Tel Aviv poll last summer showed that two-thirds of Israelis saw the settlements as a liability.

Now that the dust is settling, what have we learned? Obama has shown his capacity for contact sport, while Netanyahu's ability to manage the relationship with Washington and with his own coalition looks pretty threadbare. The boost to U.S. credibility is a good thing, but a maladroit Netanyahu is not. If he gets his own house in order and the White House exploits the leverage afforded by mediation of the proximity talks, a return to direct negotiations is conceivable. But settlements are just the first of what are likely to be bruising battles over refugees, the status of Jerusalem's holy sites, and the disposition of borders.

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